Owning a leasehold flat means paying the freeholder or a management company every year on top of the mortgage: a service charge for maintaining the building, typically £1,200 to £3,000 a year and more in blocks with lifts or concierges, buildings insurance recharged through it, and on older leases a ground rent that can rise over time. A flat with £250 of ground rent, £1,800 of service charge and £200 of other charges costs £2,250 a year, £187.50 a month, before any major works. Ground rent on new leases has been limited to a peppercorn, effectively nothing, since June 2022. The lease length matters as much as the charges: below 80 years a flat becomes expensive to extend and hard to sell.
The regular charges
| Charge | What it is | Typical level |
|---|---|---|
| Service charge | Your share of cleaning, lighting, repairs, gardening, lifts, management fees and a reserve fund for major works | £1,200 to £3,000 a year for most flats; £4,000 or more with a lift, concierge or gym |
| Buildings insurance | Arranged by the freeholder for the whole block and recharged | Usually inside the service charge; £200 to £600 a year per flat |
| Ground rent | A payment to the freeholder for the land, set by the lease | Nil on leases granted since 30 June 2022; £100 to £500 a year on many older leases, sometimes doubling every 10 to 25 years |
| Permission and administration fees | Charges for consent to alter, sublet or keep a pet, and for information packs on sale | £50 to £500 an item |
Service charges are set annually from a budget and reconciled at the year end, so a demand for a balancing payment can follow. Leaseholders have the right to see the accounts and invoices, must be consulted under Section 20 of the Landlord and Tenant Act 1985 before works costing any one of them more than £250 or contracts over £100 a year, and can challenge unreasonable charges at the First-tier Tribunal. The ground rent and service charge calculator totals the yearly and monthly outgoings for any set of charges.
Ground rent and the 2022 reform
The Leasehold Reform (Ground Rent) Act 2022 set ground rent on new residential long leases at a peppercorn from 30 June 2022, which removed the escalating ground rents that had made some newer flats unmortgageable. Existing leases keep their terms, so a flat bought in 2015 with £300 of ground rent doubling every ten years still carries that clause, and lenders scrutinise any lease where ground rent exceeds £250 outside London or £1,000 in London, or doubles more often than every 20 years. A ground rent above those levels can be reduced through a lease extension, which resets it to a peppercorn, and government proposals to cap ground rents on existing leases remain in progress.
Lease length
| Years left on the lease | Effect |
|---|---|
| Over 90 | Little effect on value or mortgages |
| 80 to 90 | Extend before 80: the cost is still moderate |
| Under 80 | Extension cost rises sharply because the freeholder shares in the increase in value; many lenders refuse or restrict mortgages |
| Under 70 | Value falls markedly; extension can cost tens of thousands of pounds |
Under the statutory route a leaseholder of a flat can add 90 years to the lease and reduce the ground rent to a peppercorn, and the owner of a leasehold house can add 50 years. Since January 2025 there is no longer a requirement to have owned the property for two years before making a claim. The Leasehold and Freehold Reform Act 2024 provides for longer extensions and a cheaper valuation method once its remaining provisions are brought into force, but the current cost still depends on the years remaining, the ground rent and the flat’s value, plus the freeholder’s legal and valuation fees. A buyer should treat a lease under 85 years as a negotiating point and check the extension cost before exchange.
Selling and buying a leasehold flat
Sellers pay the freeholder for a leasehold information pack, commonly £200 to £500, which sets out the service charge history, insurance, planned works and any disputes. Buyers should read it for the reserve fund balance and any Section 20 notices, since a cladding, roof or lift replacement can produce demands of £10,000 or more per flat; the Building Safety Act 2022 protects qualifying leaseholders from most cladding costs in buildings over eleven metres, but not from ordinary major works. Our first-time buyer deposit guide covers the purchase costs, the moving cost calculator totals them, and shared ownership buyers pay service charges on the whole property however small their share.
Reducing the costs
Leaseholders can take over management of their block through the Right to Manage without proving fault, appoint their own managing agent and re-tender insurance, which often cuts the service charge. Buying the freehold collectively through enfranchisement removes ground rent entirely and gives control of the lease terms. Both routes need a majority of qualifying leaseholders in the building and some legal cost, and both are being made simpler under the 2024 Act. The Leasehold Advisory Service gives free guidance, and disputes over charges go to the First-tier Tribunal rather than the courts.
Common questions
How much is a typical service charge? £1,200 to £3,000 a year for most flats, rising to £4,000 or more in blocks with lifts, a concierge or extensive grounds. It is set from an annual budget and reconciled at the year end.
Do new flats have ground rent? No. Leases granted since 30 June 2022 carry a peppercorn ground rent, which is nothing in practice. Older leases keep the ground rent written into them.
When should I extend my lease? Before it falls below 80 years, when the freeholder starts to share in the increase in value and the cost rises sharply. There is no longer a two-year ownership requirement.
Can I challenge my service charge? Yes. You can demand the accounts and invoices, must be consulted on major works over £250 per leaseholder, and can apply to the First-tier Tribunal over unreasonable charges.
What is a Section 20 notice? The formal consultation a freeholder must run before works costing any leaseholder more than £250 or a contract worth over £100 a year. It signals a large bill coming.
Is a leasehold house the same? Most leasehold houses can be extended by 50 years or the freehold bought, and new leasehold houses have been largely banned in England since the 2024 Act.
Information, not legal or financial advice. The peppercorn rule, extension terms and consultation thresholds are as set out on gov.uk: leasehold property and in the Leasehold Reform (Ground Rent) Act 2022 and Landlord and Tenant Act 1985; charge levels are typical ranges and worked figures are from the site’s calculator. Take advice from a solicitor or the Leasehold Advisory Service on your own lease.